Hogan Lovells

Hogan Lovells' LimeGreen IP

The site will give you an overview of Intellectual Property law and related procedures, and how these may differ from country to country.

Trademarks - Anti-counterfeiting: Customs watch applications - China

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-Are there any fees or local procedural requirements?

An important aspect to working with China Customs is to confirm as quickly as possible whether the detained products are genuine. This is particularly important in order to avoid delays in transporting the goods to customers who are expecting the products. An IPR owner should therefore consider listing authorized and trustworthy distributors in the GAC database.

Depending on the number and frequency of customs seizures, the distributor information can be added to the GAC database at any time.

If using an agent, the IPR owner should be able to provide the following in order to ensure efficient identification of genuine and counterfeit products:

  • Input regarding whether the consignor is authorized to export/import the goods.
  • Confirmation whether the goods are genuine.  

To be able to provide the above information in a timely manner, IPR owners should ideally have two to three persons available in China as alternative contacts that can help identify the products via photographs and other information regarding authorised consignors. These persons should be very familiar with and knowledgeable about the products and operations of the IPR owner and be able to distinguish between genuine and counterfeit products.

In more detail, customs IPR enforcement in China includes the following procedure:

  • Notification

When customs finds potentially infringing goods, they will issue an official notification to the IPR owner or its appointed agent. An official notification includes information such as the name of the consignor, the number of the goods detained, the amount of the bond required to be paid by the IPR owner, and place of exportation.

The local ports do not have authority to issue official notifications, which may lead to some delays in receiving information about potential infringements. The local ports are required to report the potential infringement to the higher level customs house that considers the case and sends the official notification to the IPR owner.

  • Acknowledgement of Receipt - deadline to respond to the notification

Once the IPR owner has received the notification by the customs house, it is necessary to execute and return an Acknowledgement of Receipt to the customs house. There is a three working day limit (excluding the date of the receipt) to reply to the notification with regard to whether the goods are counterfeits and should be confiscated by the customs. If it is not possible to verify the target goods, respond to the customs house and pay the bond within three days, the goods will be released, whether they are genuine or counterfeit. At times and depending on the port, informal extensions are possible but they should not be relied on as most customs houses apply the three-day deadline strictly.

  • Verifying seizure based on photos and information provided

Once the IPR owner has received the notification, it is important to immediately contact the relevant customs house and ask the officials to provide pictures of the detained goods which will help to verify whether the goods are counterfeits. In case of distribution of products, the IPR owner needs to verify whether the consignor is an authorized/licensed distributor.

Some local ports may contact the IPR owner directly before forwarding the matter to the higher level customs house to get more information about the genuine goods and the IPR of the legitimate owner to help them determine whether the goods are counterfeits.

In practice, some local Customs such as Nanjing Customs, Wuhan Customs, Kunming Customs normally provide sample photos of the seized goods to assist in the IP owner's identification. Other customs offices, such as Shenzhen, Shanghai, and Ningbo Customs prefer IP owners to send an agent to the local port to inspect the seizure and take photos.

  • Paying a bond

If the seizure is verified to be counterfeit, a record of bond payment must be submitted to the local Customs together with the written response.

If an IPR owner requests that certain products are detained, or if customs independently detains the goods, the IPR owner must provide a bond to cover any potential losses to the consigner/consignee in case of wrongful confiscation of the products

If an IPR owner requests that certain products are detained, or if customs independently detains the goods, the IPR owner must provide a bond to cover any potential losses to the consigner/consignee in case of wrongful confiscation of the products as well as for costs related to the activities of the customs such as storage and destruction of infringing goods. When the value of the detained goods is under RMB 20,000, the amount of the bond is the same. When the goods' value is above RMB 20,000, the bond should be equal to 50% of the value BUT not exceed RMB 100,000.

In case it is expected that there will be frequent and large numbers of notifications to seize products, an option is to file an application to post a general bond for multiple seizures in order to save putting up a deposit each time. The amount of the general bond is RMB 200,000 for a calendar year.

-How do you register a customs watch application?

The application can be made by the IP rights holder or an appointed agent. When applying for customs recordal of an IPR, a written application must be provided, which includes:

  • Name and nationality of the IP rights holder;
  • Business registration certificate;
  • Trademark ownership certificate;
  • Information and status relating to licensing of the IPR in question;
  • The name, origin, Customs at the port of entry or exit, importer or exporter, main features and prices, etc. of the goods on which the holder of the IPR lawfully exercises his right;
  • The manufacturers, importers or exporters, Customs at the port of entry or exit, main features and prices, etc. of the goods that infringe the intellectual property right, as far as it is known.

Where evidentiary documents are referred to in the application, the rights holder needs to attach evidentiary documents.

According to the PRC Customs law, documents a-f are required as part of an application for Customs recordal. However, in practice, only a, b, c are asked for. After obtaining the recordal, licensee information (d) can be added to GAC's online database. However, d, e, f are currently not an absolute requirement.

-How long does it take and what is the term of protection?

Recording IPR with China customs takes about 30 working days and costs RMB800 per recorded IPR. China Customs protects trademarks, patents (invention and utility model as well as design patents) and copyrights. The recordal is valid for 10 years or shorter if the term of the IPR expires before the end of the 10 years. It can be renewed within six months prior to the expiration of the term of validity, where the intellectual property right is valid. Each renewal of a recordal is valid for a term of 10 years.

-If filing on behalf of a subsidiary of the IP rights holder what evidence of connection to the parent company is required?

Customs watch applications can be filed by or on behalf of the rights holder provided the applicant has valid authorisation to do so.

-Is a local agent required? If so, is a power of attorney required?

A local agent is not mandatory, however, is usually desirable based on the language barrier and local knowledge. In order to act as the local agent, he/she should obtain a power of attorney from the trademark owner. If the IPR owner chooses to use an agent, the agent must be recorded with the customs. The recorded agent can act on behalf of the IPR owner during the seizure process, including receiving the official Notifications; liaising with the customs officials; training customs officials; submitting responses and paying bonds.

-What level of understanding of IP rights is available from customs? Are additional procedures or training required?

Additional training may be provided to the customs officers, but it is not required. Depending on the complexity of the goods involved, it may be useful to provide a written guideline on any distinguishing features commonly found in infringing products. In particular, for a newly recorded trademark, which is not well-known in China, customs training can bring the brand to the attention of the customs officers so that they will be more likely to pay attention to the trademark in their daily inspection work.

-When customs report on a finding how long does the rights holder have to respond and what steps are required to ensure non-release of counterfeit goods?

When customs finds potentially infringing goods, they will issue an official notification to the IPR owner or its appointed agent. Within three days upon receiving the notification from the customs house, the following must be carried out: acknowledge receipt of the Notification; obtain pictures of the detained goods; verify consignor and the goods; pay the bond; prepare and submit a response to customs.

With regard to verification of the products, the agent or the IPR owner needs to prepare a Written Application of Confiscation for Counterfeits or a Written Application of Release of Genuine Goods. In case of a request to confiscate counterfeits, simultaneously, the bond will be paid to the designated customs account, and a copy will be submitted of the remittance receipt issued by the bank.

Genuine goods are usually released within one to two days after the application for release is submitted.

With regard to counterfeit products, the customs official will interrogate and investigate the consignor. The consignor will be given a chance to defend himself by providing an authorization or other materials to prove the legitimacy of the goods. If no sufficient materials or information is provided, the goods will be confiscated by the customs. Customs will also issue a monetary penalty decision against the consignor.

Seized goods will not be released if the rights holder provides confirmation that the goods are counterfeits and they are willing to support prosecution in respect of those goods.